Wednesday, December 15, 2004

Bryant wins first round in Caterpillar patent re-examination

The re-examination of Caterpillar patents initiated by Clyde Bryant is a big guy/little guy patent story (see earlier post on IPBiz). The little guy Bryant has won the first round, with claims invalidated in the first Office Action. There is a long way to go before there is a final determination. Of history, recall claims of the Eolas/Berkeley browser patent were found invalid in the first Office Action of that re-examination, but the examiner withdrew those rejections in light of the Eolas response (but made new rejections).

Jeff Nesmith of the Atlanta Journal Constitution reports:

-->After reviewing the Caterpillar patents and Bryant's petition, examiner Thomas Moulis rejected almost all of Caterpillar's claims. He said agency records show Bryant's patent was not considered when applications for the two Caterpillar patents were being reviewed.
What I don't understand is "how" Bryant's patent was NOT considered when it is "of record" (appears on first page) on both Caterpillar patents (see my earlier post on IPBiz).

Nesmith also states:

-->In addition to Bryant's previously awarded patent, Moulis said several claims appearing in an even earlier patent by another inventor undermined Caterpillar's inventions.
Thus, it may be that it is the combination that was not considered.

Of responses by the parties:

-->
Louis Isaf, an Atlanta lawyer representing Bryant, declined to comment on the declaration.
Caterpillar spokeswoman Linda Fairbanks the action "was to be expected, just part of what we expect will be a fairly lengthy process."
Caterpillar has 60 days to respond to the first Office Action in the re-examination. Clyde Bryant then will have 30 days to file a response.

**
From the report in the Atlanta newspaper, I am inferring that we are at the point described in 37 CFR 1.530:

(b) The order for reexamination will set a period of not less than two months from the date of the order within which the patent owner may file a statement on the new question of patentability including any proposed amendments the patent owner wishes to make.

(c) Any statement filed by the patent owner shall clearly point out why the subject matter as claimed is not anticipated or rendered obvious by the prior art patents or printed publications, either alone or in any reasonable

combinations. Any statement filed must be served upon the reexamination requester in accordance with § 1.248.

***
There is also a report in the Peoria newspaper on Dec. 16:

-->A written statement attributed to William B. Heming, Caterpillar's general patent counsel, said, "Caterpillar's ACERT technology is a great advancement in engine technology and has received many accolades from industry. Given this media attention, it is not unexpected to receive challenges such as this, and Caterpillar will defend against these challenges vigorously."

Caterpillar engineers Jim Weber and Scott Leman were recently presented the 2004 Inventors of the Year Award from the Intellectual Property Owners Association in recognition of the ACERT engine.
[http://www.pjstar.com/stories/121604/TRI_B517ENBQ.027.shtml]

***

Recall Caterpillar's assertion that Caterpillar, headquartered in Peoria, Ill., spent hundreds of millions of dollars on the ACERT engine, which achieves unprecedented fuel efficiency and reduces emissions of air pollutants. Of Posner's symbolism of the patent race, note that, while Caterpillar may have been under some pressure to meet EPA guidelines, it did not consider itself in a "race" with Clyde Bryant, whose patent issued before Caterpillar's patents and is cited by the Caterpillar patents. The money of Caterpillar was NOT spent to get to the patent "finish line" first, and if the rejection of Caterpillar claims holds up, then it will be legally determined that Caterpillar did not reach the finish line first. Although Judge Posner's imagery of the patent race may capture some examples (e.g., NOx, telephone), it does not capture all, and arguably may not capture most examples in the pharmaceutical area and thus does not serve as justification for reducing patent lifetimes.

The initial part of the post in question observes
-->
The real concern about patents is the costs imposed on inventors themselves. There is the cost of searching the records of the patent office to make sure you're not going to be infringing a patent, but more important is the transaction cost involved in obtaining a license from an existing patentee. Invention is a cumulative process; a new invention is usually an incremental improvement on an existing one. So the more patents that are “out there,” the greater are the costs involved in negotiating for a license from every patentee whom the new inventor may arguably be infringing. Because a patent can be obtained without even a prototype, because patent examiners are overworked and it takes less work to approve than to reject a patent application, and because the U.S. Court of Appeals for the Federal Circuit, which reviews patent validity, is extraordinarily pro-patent, the number of issued patents has grown steadily in recent decades. There is concern that some fields are so blanketed with patents (which may be owned by firms that do no production at all—whose business plan centers on demanding license fees under threat to sue for patent infringement) that innovation is actually being impeded. Most firms don’t actually want patents; for those firms, the costs involved in obtaining licenses from patentees are not offset by the prospect of obtaining license fees on their own patents. There are many alternatives to patents for protecting one’s investment in R&D, and they are often cheaper and more effective. They include: trade secrecy; the advertising value of, and the consumer loyalty generated by, being the first to produce a popular product; the fact that marginal cost may increase steeply with output, so that a price equal to marginal cost may cover the fixed costs of invention after all; the fact that it may be costly and time-consuming for competitors to duplicate the invention exactly; and, related to the last point, the learning curve—if costs of production fall over time as the producer learns more about how to make the product at least cost, the first firm in the market will tend to have a cost advantage over competitors, who arrive later. But if other companies are busy getting patents, you may have to patent defensively, and the patent thicket thickens.
There is a lot to be said about this. Of the text --There are many alternatives to patents for protecting one’s investment in R&D, and they are often cheaper and more effective. -- trade secrets would be of no value in the pharmaceutical industry, wherein one must disclose what's in the pill. Trade secrets would be of no value for Bryant or Caterpillar. Trade secrets would have been useless to the Wright Brothers, and in the end, patents were useless to the Wright Brothers. The story of the development of radio illustrates how the patent system can break down with multiple patent owners.

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About Me

I'm a patent lawyer located in central New Jersey. I have a J.D. from the University of Chicago and a Ph.D. from Stanford University, where I studied graphite intercalation compounds at the Center for Materials Research. I worked at Exxon Corporate Research in areas ranging from engine deposits through coal and petroleum to fullerenes. An article that I wrote in The Trademark Reporter, 1994, 84, 379-407 on color trademarks was cited by Supreme Court in Qualitex v. Jacobson, 514 US 159 (1995) and the methodology was adopted
in the Capri case in N.D. Ill. An article that I wrote on DNA profiling was cited by the Colorado Supreme Court (Shreck case) and a Florida appellate court (Brim case). I was interviewed by NHK-TV about the Jan-Hendrik Schon affair. I am developing ipABC, an entity that combines rigorous IP analytics with study of business models, to optimize utilization of intellectual property. I can be reached at C8AsF5 at yahoo.com.